Offset - any point of overpayments?

nicholbb

Hi,
Is there any benefit to overpaying with an offset mortgage? When would someone do this? I've been going over this and am worried I'm missing something.

I have two options: Reduce the term (overpaying - by paying the same amount each month as if I didn't have an offset), or reduce the payments each month.

I've selected to reduce payments each month and will add the difference (with my additional monthly savings) to the offset.

I've a 5 year fixed offset mortgage with Scottish Widows.


Thank you

silvercar

I've selected to reduce payments each month and will add the difference (with my additional monthly savings) to the offset.

Exactly what we do. Personally I don't know why anyone would do anything different, unless they didn't trust themselves not to dip into the offset for frivolous spending.

Browntoa

Doing overpayments cleared my offset in 10 years rather than 25

nicholbb

Browntoa wrote: »

Doing overpayments cleared my offset in 10 years rather than 25

Congratulations. I'm aiming to be mortgage free in 12 years, so you've already achived better than my target.


How did overpayments help you, compared to just putting the savings in the offset, then making a lupsum payment at the end? Was it helpful because you saw the mortgage reducing quickly, stopped you dipping in, improved credit or something else?


Thank you

dimbo61

We had an offset mortgage with Yorkshire building society and overpaid every month as well as build up our savings in the offset accounts.
Now we built up a massive overpayment pot !
When we needed a " Payment Holiday " one summer I just rang them up and asked for 3/4 months of Not paying the mortgage.
No problem Sir your well ahead in your payments and this won't affect your credit score/history.
Did this for 2 summers
Paid off the mortgage in 8 years instead of 22 and saved about £70,000 in the process.

getmore4less

i makes no difference offset or overpay.

Where it can make a difference is if the mortgage allows use of the overpayments you reduce your savings pot below the means tested benefit threshold.

Then should you get in to income difficulties you don't have to use savings.

Barclays with the way their savings reserve worked you could convert a mortgage debt into a overdraft allowance that you could call on any time.

In practice many get to the point where other saving investments would negate any benefits anyway so might as well just have an offset pot.


You don't need a payment holiday if you stick all the money in the offset you just pay the regular payment from the offset.

getmore4less

you get all sorts of nonsense with people talking about relative rates an such like but the reality with an offset all you are doing is just borrowing less, that's why they work.

nicholbb

Thank you for all the replies.

The payment holiday is interesting if something goes wrong with a payment (never happened).

But seems like keeping in the offset is good for me.